When it comes to taking charge of your financial future, the first step is understanding where you stand today. That’s where a personal balance sheet comes in. Think of it as your financial selfie—a snapshot of what you own, what you owe, and the difference between the two – your net worth. This simple yet powerful tool is the foundation for building wealth and achieving financial security.

What Is a Balance Sheet and Why Does It Matter?

A balance sheet lists your assets (everything you own) and your liabilities (everything you owe). Ideally, you should value your assets and liabilities on the same day. This is often accomplished by using the last day of the month, year, or quarter. Valuations can be found on account statements or by logging into your accounts online. You might need to search a little to find values of items like real estate (try Zillow.com), automobiles (Edmunds.com), or collectibles (eBay). For purposes of a balance sheet, you should use a value that reflects what the item could be sold for today.

Once you have listed and researched the value of your assets and outstanding liabilities, subtract liabilities from assets, and you have your net worth:

Once you have listed and researched the value of your assets and outstanding liabilities, subtract liabilities from assets, and you have your net worth:

Assets – Liabilities = Net Worth

The balance sheet provides vital information for determining your financial health at a specific point in time. Combined with your personal income statement – another key financial statement for taking charge of your finances – the balance sheet provides clarity on where you stand financially. Why is this important? Because about 80% of women will become the sole financial decision-maker at some point in their lives, whether due to widowhood, divorce, or other factors. Knowing your net worth helps you make informed decisions about retirement, estate planning, and day-to-day financial choices.

Tracking Progress Over Time

Your balance sheet isn’t just a one-time exercise—it’s a tool for monitoring progress. In your early adult life, you will likely have low (or even negative) net worth due to student loan debt and the expenses of setting up your household. As you progress through your career and regularly set aside money for saving and investing, your net worth will grow. By updating your net worth statement regularly, you can see how your net worth grows as you pay down debt, increase savings, and invest wisely. This ongoing check-in helps you stay motivated and identify areas that need attention.

Using Ratios and Benchmarks for a Financial Health Check

Net worth alone doesn’t tell the whole story. Ratios and benchmarks provide context and help you evaluate whether you’re on a healthy path. Targets will change over the life cycle as individuals build their net worth by paying down debt and building assets. For a person entering – or already in retirement, below are some useful ratios based on net worth.

These ratios act like vital signs for your financial health. If your numbers fall outside the recommended ranges, it’s a signal to adjust your strategy—whether that means reducing debt, rebalancing investments, or postponing retirement.

Benchmarks: Are You Where You Should Be?

Financial firms like Fidelity3 suggest net worth targets by age to help you gauge the progress you are making towards saving for retirement, with the goal of being able to maintain your lifestyle once you get there. According to Fidelity, by age 60, your net worth should ideally be about 8 times your annual income, and 10 times by age 67. For a 60-year-old with a median income of $71,000, that computes to about $568,000. Yet, according to the Federal Reserve4 , the median net worth for Americans in their 60s is roughly $300,000, only about half of the recommended amount. This gap underscores the importance of proactive planning.

Your Balance Sheet as a Road Map

Your balance sheet can become a map of where you have been and a trend indicator of where you are heading. To gain greater insight, take the next steps: create a personal income statement and then work with a Certified Financial Planner™ professional to build a comprehensive financial plan, which serves as a much more detailed map of where you are heading and the paths you can take to optimize your journey.

Final Thoughts

Your balance sheet is more than a document—it’s a roadmap to financial confidence. Start by creating one today, update it regularly, and use ratios and benchmarks to measure progress. Over time, this simple tool will help you stay on track, identify gaps, and empower you to make informed choices for a secure future.

^{1 What Should Your Retirement Portfolio Include? | Charles Schwab
2 How Much Cash Should Retirees Have on Hand?
3 https://www.fidelity.com/viewpoints/retirement/how-much-do-i-need-to-retire
4 Source: Federal Reserve Survey of Consumer Finances, 2022}